Page 85 - RusRPTJul20

The average long position among the most liquid names traded on MOEX rose by a further 2.4% in the week ending June 10. Short positions are falling at a more aggressive pace – down c15%. ‘Smart money’ were net sellers for the second week in a row, albeit marginally.
“Flow momentum remains encouraging for speculators and further underperformance of EMs relative to DMs is being challenged. We continue to read positively into the data from a short-term, flow-driven, speculative perspective. Yet our bottom-up 12MF RTS index target stands at 1,400, corresponding to a Hold – the market is fairly valued overall,” Smolyaninov said.
BCS GM reports that the most popular stocks were Russia’s two biggest supermarket chains, X5 Retail Group and Magnit, that have been heavily sold during the crisis for obvious reasons. But it appears both stocks have reached the “too cheap to ignore” stage and brave investors are calling the bottom and buying again. Likewise, investors were buying mining company Norilsk Nickel enthusiastically, which suffered a catastrophic oil spill last week and was also heavily sold as a result.
By the end of June the rally had run out of steam and was awaiting more triggers​. The RTS was trading at slightly 1,200-1,250 as of the end of June and was struggling to break out higher.
The market as a whole remains down by some 28% YTD, but various sectors have done much better.
Metals & mining very briefly got back into positive territory in June YTD, but remains a few points below flat at the time of writing.
Utiltities have also recovered most of the ground they lost since their February rally and were -4% YTD as of the end of June.
Consumer stock gain the most in the last week of June, up by 10ppt to -5% YTD as the lockdown came off.
Telecom has also staged something of a recovery, driven by the tech names in the sector and was down 7% YTD as of the end of the month.
Financials and oil & gas remain the dogs. The banking sector recorded a tiny profit in May and will be impaired for the rest of the year, until returning to health next year.
Oil & gas is also stuck due to the lower prices of oil, although they recovered from a nadir of $25 to circa $40 by the end of June. However, a virus second wave fears and complications in the oil production cut deal mean the outlook for oil prices remain uncertain so investors are staying away from the sector.
Gazprom​’s shares have grown 28% (in $terms) over the last three months​, and had almost reached VTBC 12-month Target Price. Updating the company’s model with the most recent macro, operating and financial data, coupled with the reduction in WACC to 7.4% on the back of the lower cost of debt, leads to a minor increase in our new 12-month Target Price for Gazprom to $3.00 (from $2.80). Given that this implies a 15% ETR, we are downgrading our recommendation for Gazprom’s shares to Hold (from Buy).
85​ RUSSIA Country Report​ July 2020 ​ ​www.intellinews.com